Tag Archives: funding

The National Empowerment Fund (NEF), an agency of the Department of Trade and Industry, has unveiled the Enterprise Development Fund (EDF) to invest in small, medium and micro black businesses by way of financial loans varying anywhere between R250 000 (US$37 000) and R75-million ($11-million).

The only real distinction between the EDF and various other agencies of the department is the fact that EDF raises its capital as a result of contributions by big businesses, who will shell out 3% of their annual profits in the project.

This simply means that big business is going to be assisting smaller ones get established.

The NEF has recently obtained funding of R2.3-billion ($298-million) coming from the Treasury, and is also getting excited about a prospective cash injection coming from the top 40 companies on the Johannesburg Stock Exchange. This sum of money could quite possibly meet or exceed R5.3-billion ($749-million).

Making contributions towards empowerment

Philisiwe Buthelezi, the fund’s CEO, stated: “We are thinking about creating a brand new industrial capacity by way of inputs driven by black South Africans.”

She revealed that the fund is designed to bridge the gap between advantaged and disadvantaged citizens – “not by taking from the haves, but stating the way we can partner to empower the have-nots.”

As a result of giving 3% of their profits, private establishments are going to generate points as an a assessed entity according to the Broad-based Black Economic Empowerment Act of 2003, which states that comapnies making contributions will earn a 15% weighting towards 100% compliance.

The financing is voluntary however if businesses do not comply, they have to deal with shedding their empowerment accreditation points.

Contribution will lead to specific tax benefits – firms that do conform will get a tax benefit of up to 10% off their taxable income for the reason that NEF is tax-exempt, as a result companies that commit to the fund defintely won’t be subject to a donations tax.

NEF CEO Philisiwe Buthelezi

Lawrence Mavundla, president of the National Federated Chamber of Commerce and Industry, explained: “The legislation states that businesses need to contribute 3% when it comes to enterprise development and 2% ought to be allotted to corporate social investment.”

Mavundla depicted his expectation that big corporate will likely be prepared to contribute to the fund. “I sincerely hope the NEF will in addition provide post-funding mentorship to assist these small black companies to develop,” he added.

For the reason that a shortage of practical experience and skills can be described as risk to the success of small companies within a competitive industry – and quite a few of them do falter even after funding – post-funding mentorship can be considered as a means to fix this challenge.

Leading organizations which include Volkswagen, Chrysler, Bank of America, Merrill Lynch, Nestle and Edcon already have indicated interest in the fund, said the NEF.

“To make investments and expand the fund a business is required to sign a letter of participation, agreeing to pay out more than a minimum contribution of R5 million ($747 000),” explained Buthelezi.

Funding small business in South Africa

South Africa boasts a variety of agencies geared towards improving small businesses.

They range from the Small Enterprise Development Agency, which offers business development and support services for small enterprises; Khula Enterprise Finance, which happens to be associated with funding of small to medium enterprises; the Industrial Development Corporation, and others.

Young entrepreneurs aided

The inclusion of young entrepreneurs within the overall economy is in addition a national priority, reinforced by agencies for example, the National Youth Development Agency (NYDA).

Because of its major target group aged between 14 and 35 years, the NYDA endeavors to scale back unemployment within this age bracket, as well as boost social cohesion.

The NYDA assists young entrepreneurs to establish new businesses and even to develop established ones. It was actually introduced on Youth Day, 16 June 2009 by President Jacob Zuma and was the consequence of a merger between the Umsobomvu Youth Fund and the National Youth Commission.

Among the many NYDA accounts of success is the one about a 25-year-old Ntokozo Kenneth Ngcobo, who is the owner of Miazi CC, an electrical design and installation company. Miazi boasts a variety of big clients including Eskom and government departments.

Ngcobo said: “I believe my electrical engineering diploma and employment experience offered me a firm foundation in addition to make it possible for me to network with the relevant people.”

He explained that his objective for the next five years is to break into new markets, because he at present operates exclusively in his home town of Pietermaritzburg in KwaZulu-Natal.

The Industrial Development Corporation (IDC) has authorized funding of R8.4 billion in the last financial year, which will undoubtedly significantly help when it comes to job creation.

“This stands out as the largest amount ever for South African-based investments. Funding approvals in the past year under review are envisioned to generate 19 650 full time jobs in addition to preserving a further 11 650, which has a combined influence on employment of 31 300, up from 25 000 in 2010.

“An additional 8 100 job opportunities are likely to be created as a result of direct linkages to actions in the informal economy,” proclaimed the IDC in its financial results for the year ended 31 March 2011.

The IDC posted a R2.7 billion profit as a consequence of enhanced profitability from operations, performance of equity accounted investments, containment of operating expenses and lower impairments.

The South African economy recovered gradually from the latest recession, considering the pace of growth increasing in momentum towards the latter part of 2010 and firming in the initial quarter of 2011.

“We have maintained our focus both on sustaining and expanding high impact manufacturing capacity and also have been successful in enhancing our influence on job creation,” IDC CEO, Geoffrey Qhena, stated.

IDC CEO, Geoffrey Qhena

From the overall magnitude of funding approvals, 97 percent happen to be within the priority sectors determined in the New Growth Path (NGP), which includes manufacturing, infrastructure, agriculture and the mining value chain; 49 percent of funding approvals was allocated to developments in provinces other than Gauteng, Western Cape and KwaZulu-Natal to guarantee provincial fairness.

“The IDC will continue to leverage its portfolio to boost development outcomes. This approach consists of establishing ring-fenced programmes to subsidise industry development, much like the R10-billion Gro-e-Scheme with concessionary terms and conditions geared towards job creation, that has been launched in February 2011,” explained Qhena.

The corporation in addition has authorized R4.1 billion of the R6 billion allotted to support companies in distress. Over 17 000 job opportunities were generated and preserved as a consequence of the R2 billion UIF scheme unveiled in May this past year, R1.5 billion of which has already been authorized.

“IDC is going to make available R102 billion over the upcoming five years for investment. To accomplish this degree of investment, the collaboration of a variety of stakeholders and social partners is vital. These comprise of businesses, co-funders, labour, government and civil society,” said Qhena.

In his budged vote in April, Economic Development Minister Ebrahim Patel pointed out that over the next five years, green industries is going to be allocated R22.4 billion, while mining and beneficiation is going to be allocated R22.1 billion. Manufacturing will get R20.8 billion while the agriculture value chain will receive R7.7 billion.

More than R2 billion has been set aside for the building of classrooms, Education MEC, John Mchunu announced.

“This financial year an amount of R2 031 billion has been set aside for infrastructural developments,” said Mchunu delivering the R29 billion budget in the KwaZulu-Natal legislature in Pietermaritzburg.

The money would be used, among other things, for building 20 new schools, he said.

He said this would include 2000 ordinary classrooms and 60 multi-purpose classrooms, 300 administration centres with offices, storerooms and staffrooms.

“Water will be provided to 200 schools and an additional 3200 toilets will be built and 200 more schools will be electrified. One hundred schools will have their fences upgraded,” he said.

Mchunu said R26 million had been ring-fenced for recapitalisation of four historically disadvantaged boarding schools, Mlokothwa, Siyamukela, Vryheid Comprehensive and Estcourt high schools.

He said his department felt that a massive injection of capital was a correct way of dealing with infrastructure backlogs.

“The department continues on a multi-pronged approach to address backlogs in the provision of classrooms, administration offices, toilets, computer and science laboratories, and media centres,” said Mchunu.

He said his department faced a challenge of rebuilding schools ravaged by storms.

“The majority of schools that sustain extensive storm damages are in rural areas and had been constructed by communities themselves, some without any subsidies,” he said.

Five hundred and fifty five schools had been damaged by storms since 2008. It would cost the department R234 million to repair them, he said.

“This is over and above the infrastructure backlog of 7,550 standard classrooms, 9 936 toilet seats, and 3 435 administration blocks,” he said.

A review of funding framework for higher education institutions that could lead to more money being allocated to historically disadvantaged universities is going ahead as planned this year.

Higher Education and Training Minister Blade Nzimande told parliament during his budget vote on Thursday that a ministerial task team will also study university student housing and assess the need for additional accommodation, the quality of existing facilities and options for the financing of new student housing.

In 2008, the South African government increased funding to universities to R3.6 billion to reverse a funding decline, reward institutions that produce more graduates, improve infrastructure and relieve financial pressure to raise fees – an issue that propels student protest countrywide.

Nzimande said there were discrepancies in the current funding model for universities in that more money is being channeled to the top universities while the historically disadvantaged continued to suffer infrastructure backlogs. “What is of concern to me is how we address the problems of historically disadvantaged universities which I have been told they are still disadvantaged by the way,” he said.

More than R3.2 billion from the department’s budget has been allocated to infrastructure funds to universities for the next two financial years. Nzimande said the funds will help universities to increase production of graduates in the critical areas of engineering, life and physical science, teacher education and health sciences. About R686 million of the funding will be used to improve student housing. About R431 million goes to teaching development grants while R185 million has been set aside for provision of foundation courses.